Former city council candidate Ian Rabb's Two Ten Recovery Inc. is trying to buy the Hecla Resort, which has been closed and in receivership since November 2010, and turn it into a high-end treatment centre.

The receiver would not comment on the proposed deal, but former owner Joe Paletta sees Rabb's initiative as partial vindication for what he contends was unreasonable treatment from the province.

Rabb's proposal is exactly what Paletta wanted to do with the resort, located in Grindstone Provincial Park, when he owned it from late 2005 until late 2010. It was Rabb's company Paletta had lined up to run a proposed October-to-April health and wellness operation during the slow winter months at the resort.

But the province threw up so many roadblocks in his effort to build such a centre, as well as time-share condos, Paletta walked away from the property and sued the province.

This was after he had poured $32 million into the property -- $19.5 million of his own money, a $5.5-million loan from the province and $8.5 million from the Business Development Bank of Canada (BDC).

Paletta claims both projects had already been approved and set out clearly in the business plan.

The resort's 18-hole championship golf course opened this week for the season, but since November 2010 Hecla Resort has been closed and the property is being managed by a court-appointed receiver.

The province had owned and operated the resort for many years until it was sold to Paletta and lost about $9 million.

He said attitudes and support from the province changed dramatically between the time he entered the agreement to acquire the property for $1 in 2005.

"It was the most expensive dollar I ever spent," he said. And then it went into receivership.

Asked what he thinks of Rabb's proposal, Paletta said, "I think it is the best thing that could happen to the place. Nothing else is going to work there. We knew that."

That analysis is partially borne out by CBRE, the real estate brokerage the receiver hired to market the property. CBRE has complained of tepid interest from the marketplace and until Rabb's offer, had not been able to solicit any other interest.

Last year, it persuaded the court to post a list price of $6.5 million, but in its February 2012 memorandum to the receiver, CBRE said, "We feel that at this point, it is worth considering relaunching the investment flyer and marketing material with a reduced list price of $3.5 million... with the intent to bring in offers on the property."

Rabb would not comment on the negotiations, but one source said he has offered $3 million.

"We are waiting for the conditions of the offer to be accepted," Rabb said.

His proposal is for a 100-bed world-class recovery program for drug and alcohol treatment, as well as for eating disorders and gambling and sex addictions.

Rabb and Paletta cited industry reports showing addiction or health and wellness tourism are some of the fastest-growing segments of the tourism industry.

Paletta is suing the province and the BDC for undisclosed damages he said happened because the province reneged on lease and master agreements that detailed his intentions to build condos and/or a health and wellness centre at the resort.

The province has not filed a statement of defence and is seeking to have the matter resolved in arbitration.

The statement of claim says when the province altered conditions making development of 72 condos impossible, Paletta presented a "refocusing plan" to operate a health and wellness centre.

He said that type of operation had been contemplated and approved in the master agreement, but the province and BDC would not approve.

"When we first were thinking about acquiring Hecla, I was concerned," Paletta said, referring to the fact there would be bureaucratic issues about the resort being in a provincial park.

"But I was assured that there was political will to make it work," he said.

But he said the subsequent retirement of a couple of key provincial officials and clashes between tourism and conservation officials derailed the project.

While Paletta was trying to make a go of it at Hecla, he was also negotiating the sale of the Days Inn on McPhillips Street to Manitoba Lotteries Corp.

He said that deal worked out well for him, but added if he gets some resolution on the Hecla matter, it may be his grandchildren who will collect.

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About Martin Cash

Martin Cash joined the Free Press in 1987 as the paper’s business columnist.

He has spent two decades chronicling the city’s business affairs.

Martin won a citation of merit from the National Newspaper Awards in 2001 for his coverage of the strike and subsequent multi-million-dollar union settlement at the Versatile tractor plant. He has also received honours and awards for his work on agriculture and technology development in Manitoba.

Martin has written a coffee-table book about the commercial and industrial make-up of the city, called Winnipeg: A Prairie Portrait.

Martin Cash on Twitter: @martycash

martin.cash@freepress.mb.ca

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